Treasurer: Pay down pension debt

Mike Ramsey

Thursday

May 24, 2007 at 12:01 AMMay 24, 2007 at 8:35 PM

CHICAGO — Illinois Treasurer Alexi Giannoulias says lawmakers could shave billions of dollars off the state’s massive pension debt by using the millions of dollars his office generates each year from unclaimed property.

By MIKE RAMSEY

GATEHOUSE NEWS SERVICE

CHICAGO — Illinois Treasurer Alexi Giannoulias says lawmakers could shave billions of dollars off the state’s massive pension debt by using the millions of dollars his office generates each year from unclaimed property.

Revenues from the unclaimed assets already go toward the state’s annual payment on pensions, which Giannoulias likens to the minimum monthly payment on a large credit card balance. He said the money from his office — typically about $90 million per year — would be better spent paying down the state’s unfunded pension liability of $40 billion.

The downside: If the treasurer’s money is no longer part of the annual pension payment, lawmakers would have to identify new funds to offset the loss.

“They have a little more (money) they have to come up with,” Giannoulias acknowledged Wednesday.

He warned that the larger pension debt “really threatens to cripple the state’s economy.” And Rep. Bob Molaro, a Chicago Democrat who will sponsor the treasurer’s plan in bill form, suggested the revenue from unclaimed property is a small share of the state’s yearly pension payment. Other sources include the state’s General Revenue Fund.

State government will have to pony up as much as $2.8 billion for pensions in the fiscal year that begins July 1 if it wants to follow a long-range plan to pay off 90 percent of pension debt by 2045.

Molaro said rerouting the treasurer’s money to the unfunded liability is the “prudent thing to do.”

“If you start paying $100 million here and $100 million there, by 2045, it saves us billions of dollars,” Molaro said. “At the end of the day, you pay less interest, and that’s a wonderful thing.”

Giannoulias estimated that by spending $88.5 million each year as the unclaimed property rolls in, the state could cut its pension debt by more than $3 billion and avoid another $20 billion in finance costs over the next 40 years. The scenario assumes the state would immediately kick off the debt reduction by using a $146 million surplus in unclaimed property money that came in this year.

Gov. Rod Blagojevich has proposed leasing the Illinois State Lottery and selling bonds to raise $26 million to slash the pension debt. A budget aide, Becky Carroll, said administration officials “look forward to reviewing” the treasurer’s plan but declined further comment.

Giannoulias said he is open-minded about the governor’s pension ideas.

The first-term treasurer planned to announce his own proposal today, and it is expected to surface in the waning days of the spring legislative session. Sen. Deanna Demuzio, D-Carlinville, is lined up as a sponsor in the Senate. She said taming the pension liability could free up money for other areas of the state budget.

“Unclaimed-property revenue should supplement the state’s annual payment, not supplant it,” Demuzio said in a written statement. “We should stop pre-sweeping this money and allocate it all to the state’s suffocating, unfunded pension liability.”

The state treasurer’s office has been the repository for unclaimed assets since 1999. Though it remits the money for state pensions, rightful owners can file claims to recover their properties.

The treasurer’s office returned more than $432 million to residents and businesses over the past eight years, Giannoulias spokeswoman Kati Phillips said.

State government contributes to three major pension funds — the State Employees Retirement System, the State University Retirement System and the Teachers’ Retirement System. Additional pension systems cover state lawmakers and judges.

Mike Ramsey can be reached at (312) 857-2323 or gnsramsey@sbcglobal.net.

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